ECONOMIC GROWTH AND STABILITY

HEARINGS

BEFORE THE

SUBCOMMITTEE ON FISCAL POLICY

OF THE

JOINT ECONOMIC COMMITTEE
CONGRESS OF THE UNITED STATES

EIGHTY-FIFTH CONGRESS

For sale by the Superintendent of Documents, U. S. Government Printing Office

Washington 25, D. C. Price $2.00

JOINT ECONOMIC COMMITTEE

(Created pursuant to sec. 5 (a) of Public Law 304, 79th Cong.)

WRIGHT PATMAN, Texas, Chairman

JOHN J. SPARKMAN, Alabama, Vice Chairman

House of Representatives

RICHARD BOLLING, Missouri
WIILBUR D. MILLS, Arkansas

HENRY O. TALLE, Iowa

THOMAS B. CURTIS, Missouri

CLARENCE E. KILBURN, New York

Senate

PAUL H. DOUGLAS, Illinois
J. W. FULBRIGHT, Arkansas
JOSEPH C. O'MAHONEY, Wyoming
RALPH E. FLANDERS, Vermont
ARTHUR V. WATKINS, Utah
BARRY GOLDWATER, Arizona

JOHN W. LEHMAN, Acting Executive Director

CONTENTS

PANELS

I. Historical Magnitudes and Developments Affecting the Amount

and Type of Federal Expenditures

Historical Changes in Demands for Public Expenditures for

Community Amenities, Charles E. Lindblom, associate pro-

fessor of economics, Yale University.

Federal Expenditure, Economic Growth, and Instability,

Robert T. Patterson, associate professor of economics,

Claremont Men's College and the Claremont Graduate

School..

Growth of Government Over the Past 50 Years: An Analytical

Review, Arnold M. Soloway, assistant professor of economics,

Harvard University

Some Historical Aspects of Federal Fiscal Policy, 1790-1956,

Paul B. Trescott, associate professor of economics, Kenyon

College

II. Considerations in Determining Government Functions..

Expansion of Governmental Responsibilities, Solomon Barkin,

director of research, Textile Workers Union of America,

AFL-CIO..

Economics and the Applied Theory of Public Expenditures,

Walter W. Heller, professor of economics, School of Business

Administration, University of Minnesota..

Principles of Budget Determination, Richard A. Musgrave,

professor of economics, University of Michigan

Some Problems in Optimizing the Level of Public Expenditures,

Kenyon E. Poole, professor of economics, Northwestern

University

Federal Expenditures in Modern America, Herbert Stein,
director of research, Committee for Economic Develop-

ment..

Government and the Market, Procter Thomson, associate pro-

fessor of economics, Claremont Men's College and Claremont

Graduate School.

III. Level of Government at Which Public Functions Are Performed...

Level of Government at Which Public Functions Are Performed,

George C. S. Benson, president, Claremont Men's College__

Federal Expenditure and State Functions, James M. Buchanan,
chairman, department of economics, University of Virginia__
Increasing Role of Intergovernment Transfer Payments in the
Performance of State and Local Functions, Frank L. Fern-
bach, economist, Department of Research, American Federa-
tion of Labor and Congress of Industrial Organizations..........
Adjustment of Governmental Responsibilities Via Grants,
James A. Maxwell, professor of economics, Clark University-
Centralized Versus Decentralized Finance, Harold M. Groves,
professor of economics, University of Wisconsin

Expenditure Policy for Economic Growth and Stability in a

Federal Setting, Werner Hochwald, chairman, department

of economics, Washington University..

III

www

Page

IV. Economy and Efficiency in Government Expenditures_

Some Devices for Increasing Efficiency in Government Expendi-

ture, O. H. Brownlee, professor of economics, University of

Minnesota

Interest Rate in Cost-Benefit Analysis, Arnold C. Harberger,

associate professor of economics, University of Chicago---

Criteria of Efficiency in Government Expenditures, Roland N.

McKean, the RAND Corp., Santa Monica, Calif..

Economy and Efficiency in Government Expenditures, Wilson

Wright, economist, Procter & Gamble Co-

Economy and Efficiency in Government Expenditures, Alfred

G. Buehler, professor of public finance, University of Penn-

sylvania

V. Federal Expenditures and Economic Growth--

Contribution of Federal Expenditures to Economic Growth

and Stability, Evsey D. Domar, professor of political econ-

omy, the Johns Hopkins University.

Government Expenditures and Growth, James S. Duesenberry,

professor of economics, Harvard University..

Federal Expenditures and Economic Growth, George G. Hage-

dorn, associate director of research, National Association of

Manufacturers..

Federal Expenditures and Economic Growth, Stanley H. Rut-

tenberg, director of research, American Federation of Labor

and Congress of Industrial Organizations.

Federal Expenditures and Economic Growth: Analysis and

Policy, Daniel C. Vandermeulen, associate professor of

economics, Claremont Graduate School and Claremont

Men's College_

Government Expenditure and Economic Growth, David Mc-

Cord Wright, William Dow professor of economics and

political science, McGill University, Montreal, Canada_____

VI. Federal Expenditures and Economic Stability-

Government Spending and Economic Stability, Walter D.

Fackler, assistant director of economic research, Chamber of

Commerce of the United States..

Anticyclical Expenditure Variation, Walter Froehlich, professor

of economics, Robert A. Johnston College of Business Ad-

ministration, Marquette University---

Federal Spending and the Stability of the Postwar Economy,

Bert G. Hickman, the Brookings Institution_-_-

Varying Public Construction and Housing To Promote Eco-

nomic Stability, Sherman J. Maisel, professor of business

administration, University of California (Berkeley).

Federal Spending and Economic Stability, Ralph Robey,

economic adviser, National Association of Manufacturers__

Government Interest Payments: Their Relationship to Eco-

nomic Growth and Stability, James R. Schlesinger, assistant

professor of economics, University of Virginia

Federal Expenditure and Economic Stability: The Fallacy of

the Balanced Budget, Harold M. Somers, dean and professor

of economics, School of Business Administration, University

of Buffalo..

VII. Procedures for Determining Federal Spending Programs.

Hidden Effects of Federal Credit Programs, George F. Break,

associate professor of economics, University of California,

Berkeley-

Guides and Procedures for Determining Federal Expenditure

Programs, Gerhard Colm, chief economist, National Planning

Association__

Basic Weakness in Federal Budget Procedure, George Y.

Harvey, director, Bureau of Government Research, Univer-

sity of Missouri.

Systemic Improvement in the Federal Budgetary Process,

Walter G. Held, secretary, Committee on Government Ex-

penditures, Chamber of Commerce of the United States----

112

113

115

119

120

122

141

142

143

145

148

156

158

187

187

190

191

193

195

197

198

235

236

237

240

242

VII. Procedures for Determining Federal Spending Programs-Con.

Improving Budget Procedures in Congress, Roswell Magill,

president, Tax Foundation, Inc., partner, Cravath, Swaine

& Moore

Government Budgets and Their Relation to National Accounts,

Richard Ruggles, professor of economics, Yale University-

Federal Government Spending Process, Murray L. Weiden-

baum, senior operations analyst, Convair, General Dynamics

Corp...

VIII. Federal Expenditures for National Security.

Page

243

245

247

338

339

Military Expenditures, Economic Growth, and Stability,

Arthur E. Burns, professor of economics, dean, The Graduate

Council, George Washington University.

Economic Effects of Postwar National Security Expenditures,

Leo Fishman, professor of economics and finance, and Betty G.

Fishman, lecturer in economics, West Virginia University-- 339-341

Impacts of National Security Expenditures Upon the Stability

and Growth of the American Economy, George H. Hilde-

brand, professor of economics and director of the Institute of

Industrial Relations, University of California, Los Angeles;

and Norman V. Breckner, assistant professor of economics,

University of California, Los Angeles...

Federal Spending for National Security, David Novick, chief,

Cost-Analysis Department, the RAND Corp., Santa Monica,

Calif

343

346

Defense Budget, Arthur Smithies, Nathaniel Ropes professor of

economics, Harvard University

350

385

386

388

390

392

IX. Federal Expenditures for Foreign Aid.

Foreign Aid Expenditures of the United States, Robert E.

Asher, the Brookings Institution....

America's Foreign Aid Program, Robert E. Baldwin, professor

of economics, University of California, Los Angeles---.

Some Notes on Foreign Economic Aid, M. Bronfenbrenner,

professor of economics, Michigan State University-----

Perspective on Foreign Aid, Howard S. Ellis, Flood professor of

economics, University of California, Berkeley, Calif.

Self-Help, Traditional Investment and Foreign Economic Aid,

Virgil Salera, senior economist, American Enterprise Asso-

ciation...

Foreign Aid-Some Issues and Problems in Assessment, Wilson

Schmidt, associate professor of economics, the George Wash-

ington University...

X. Federal Expenditures for Natural Resources Development---

Evaluation of Federal Expenditures for Water Resources Proj-

ects, Otto Eckstein, assistant professor of economics, Harvard

University..-

394

396

431

432

Water Resources, Martin G. Glaeser, professor of economics and

commerce, University of Wisconsin..

434

435

436

Use of Natural Resource Expenditures to Promote Growth and
Stability in the American Economy, Lawrence G. Hines,

professor of economics, Dartmouth College...

Federal Expenditure Policy for Economic Growth and Stability

in the Area of Natural Resource Development With Special

Reference to the Potential Impact of Atomic-Energy Devel-

opments on the Energy, Fuel, and Power Economies of the

Country, Karl M. Mayer, Washington, D. C..

Development of Nuclear Energy, Perry D. Teitelbaum, econ-

omist, Council for Economic and Industry Research, Inc.,

and Philip Mullenbach, research director, Nuclear Energy

Study, the Twentieth Century Fund, Washington, D. C. 438-439

Atomic Power and Energy Resource Planning, Richard A.

Tybout, associate professor of economics, the Ohio State

University.

XI. Federal Expenditures for Regional Development...

Area Development Expenditures and Economic Stability in

Local Areas, Frederick H. Mueller, Acting Secretary of

Commerce..

441

459